The Trump administration’s call for “most favored nation” drug price controls will lead to less biopharmaceutical innovation and reduced U.S. drug industry competitiveness. However, the president’s willingness to use tariff negotiations to press other nations to pay their fair share for patented drugs is salutary.
For decades, the United States has shouldered the lion’s share of global research and development in the life sciences. Meanwhile, virtually all rich nations have imposed price controls on pharmaceuticals, paying far less than is needed to sustain the innovation pipeline from which they benefit, as shown below in figure 1 from ITIF’s 2013 report, “The Hidden Toll of Drug Price Controls: Fewer New Treatments and Higher Medical Costs for the World.”
If 32 OECD nations lifted pharmaceutical price controls, the world would enjoy 25 additional new drugs per year. Moreover, foreign price controls boost the U.S. pharmaceuticals trade deficit, an issue the president is rightly concerned with. As such, it’s heartening that Trump administration has committed to including this unfair trade issue in its bilateral trade negotiations that the Office of the United States Trade Representative is pursuing.
Figure 1: Brand-name originator drug prices relative to U.S. prices, 2018
